A widespread drop in consumer expenditure, an external trade shock or an adverse supply shock, threaten all businesses. However, it is particularly startups are vulnerable, as they often don't have the reserves to sail through difficult times. Such vulnerable times are infamously known as Recession. According to the Merriam-Webster Online Dictionary, a recession is a business cycle contraction when there is a general decline in economic activity.
Yet, there can be certain preventive measures which your Indian startup can equip itself with, to face these adverse times. And hence the first basic advice will be to prepare for a potential economic downturn when times are good. Greater the progress your business makes in the good times, larger will your cushion be when the economy takes a dip. Being alert towards your business, providing convenience at your customer's door step and managing strict cash flow can help you in making the correct decisions.
Here are a few tips to make your Indian startup recession proof.
1. Take Control of Cash Flow
Regular Cash Flow is the lifeline of every business. To keep the business running, the expenses will have to be paid. Hence your receivables should not get blocked and shall be easily available. Slow-paying clients are always problematic however the bigger issue will be the clients who go out of business and hence don’t pay at all. Keeping a tighter rein on your business’s receivables can prevent such credit from going bad. A few other measures that can secure your startup's cash flow are:
- Rigid contracts with a penalty on the outstanding balance
- System for tracking and collecting the receivables
- Ensure Credit before offering
2. Evaluate Inventory Management Practices
During an economic slowdown, it is of utmost importance to cut off all the unnecessary expenses. Now, even though controlling the expenditure is a must, but the same shall not be sacrificed at the cost of your business product’s quality. You can consider altering your suppliers, to obtain inputs are lower rates.
3. Keep Marketing
Often in lean times, startups make the mistake of cutting back on their marketing practice. Marketing is one of the most important expenditures when we speak of Indian startups. Because of slow market growth, every consumer goes looking for a more cost effective variant to their needs. Such difficult times are actually wonderful opportunities to market your product as various buying decisions get changed.
4. Improve communications with your customers
While it’s important to market well and attract new customers, it is also equally necessary to retain the old ones. Their entrustment in your brand and product must be acknowledged and thanked for. Reassurance about the soundness of the business and your capability to meet their needs must be communicated well to the customers.
5. Get financing before you need it
It is always advised to secure your standing before taking the next big step. Hence before you enter into the turmoil it is better to set your ‘emergency kit'. Business credit is one of the most difficult things to find during times of economic crises. To be honest they simply disappear when they are needed the most. Hence it’s always suggested to maintain a good personal credit line so that it can be used as an assurance in return of finance for your startup. This will keep the business afloat even in lean times.
6. Stress-test your business
As it was experienced in the last recession, certain situations can just never be foreseen. Having said that, it is also important to equip yourself with a contingency plan. You must go through various scenarios and try and visualize how your team will handle a particular situation. To start you can analyse how to handle a sharp drop in sales. Unexpected developments can at any point in time derail your businesses.
7. Strengthen supplier relationships
Review your supply chain. For doubtful vendors, always ensure that you have a backup in case your primary one leaves you high and dry. Without sufficient supplies, your output will not even reach the market. In times of high demand and constrained supply, vendors will be in a position of picking and choosing their customers. Hence it shall become a must from the supplier to favour you.
8. Pay off your debts
Debt can prove to be fatal during a recession. Now revenue management and control are utterly important in economic slowdowns. Losing an important percentage of your revenue towards some debt payment will always be a setback. It is crucial to make money available for the operational costs. Keeping a cash reserve for a few months will always come handy. Along with that, you can either pay off the debt or divide the large sum payments into long term loans with low interest rates.
9. Add value and not price
Stagnancy in your business will always invite harm. Adding new selling points will not only attract customers but will also help in retaining the old ones. Increasing price without value will prove to be fatal. New better versions of the product present a promising and consistent image of the brand.
10. Call the bank before things get critical
Good relationships help in difficult times. But let’s first understand that banks will never benefit in you going out of business. So, it’s always suggested to negotiate better terms with the banks and make sure that in times of need, they can offer you support and leniency.
So, would you like to know more about such tips and tricks to save your Indian startup? Keep following our blog for more such tips and tricks to keep your Indian startup recession proof.
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